L'Air Liquide S.A.

Aude Rodriguez - Head of Investor Relations Fabienne Lecorvaisier - Chief Financial Office Michael Graff - Executive Vice President Guy Salzgeber - EVP, Frankfurt Hub

Theodora Joseph - Goldman Sachs Thomas Wrigglesworth - Citi Martin Roediger - Kepler Cheuvreux Andrew Stott - UBS Neil Tyler - Redburn Paul Walsh - Morgan Stanley Laurence Alexander - Jefferies Markus Mayer - Baader-Helvea Chetan Udeshi - JP Morgan Peter Clark - Societe General Francisco Rodriguez - Banco Sabadell Loharn Faiz - Exane

Good morning, everyone. This is Aude Rodriguez, Head of Investor Relations.

Thank you for joining our conference call today. Fabienne Lecorvaisier will present the third quarter revenue and Mike Graff will update you on business development.

Guy Salzgeber is also with us and will participate in the Q&A session. In the agenda, our next announcement are; on November 30 for our climate objective; and on February 14 next year for our full year 2018 results.

Let me now hand you over to Fabienne.

Thank you and good morning everyone. Thank you very much for being with us this morning.

I will start with the highlights of the Q3 activity and performance and then I will handover to Mike Graff, who’ll focus on business development, new project signing and opportunities. But may be first before you ask question on this subject, I would like to comment a minute the recent news.

The announcement of the merger between Linde and Praxair is of course not a surprise, it has been around for now two years. Finally, what we see is that it's more portfolio with combination and a real merger and very little change on local position.

We are now going to be two co-leaders far ahead are the competitors to be noted. During these last two years, Air Liquide moved ahead.

We acquired our integrated Airgas, reinforcing our position in the U.S. on the offshore merchant.

We launched NEOS underlying the teams along a customer driven vision with ambitions objectives on the ID connected network organization. And we reinvented our innovation approach, leverage our digital transformation and took a leading position in the hydrogen energy development.

This move definitely raised our confidence in our ability to deliver profitable growth over the long-term. Let’s now come back to our Q3 performance and the trends we identified in each one we're concerned, we have a strong growth at the top of the NEOS range in all Gas and Services business lines.

We also saw an improvement in engineering, as well as business developments in global market and technology. Efficiencies on synergies continued to deliver in line with plans and the investment opportunities are ramping up.

Let’s look at the sales evolution and I am on Slide 4. Growth for Gas and Services is 5.2% comparable basis slightly higher than for H1.

In Engineering and Construction sales continued to recover and profits are breakeven for the quarter. Global Markets and Technologies has plus 23% are supported in particular by strong maritime activity and new biogas projects.

For the Group sales, we are up 6% on a comparable basis and 6.6% as published, benefitting from the softer negative ForEx headwind from a positive energy pricing effort. In fact in Q3, the global environment remains favorable with the same watch point as for Q2 regarding industrial pollution in Europe.

Currencies are now more aligned with last year prices even if we still expect a minus 4% negative effect for the full year. Conversely, energy pricing is becoming more positive and we should be at plus 1% full year.

Coming back to growth drivers, Americas up 5%, supported in particular by higher growth in the U.S. and Canada, developing economies at plus 11%, benefited from the dynamism of our business in China, and Asia globally is at plus 6%.

All of our business lines were strong and in the upper range of their NEOS' objective. Similarly to what we saw in the Q2, the big business in other words the loading of our existing capacities generating more than 4% growth, benefitting from well oriented end market and better pricing.

And this is more than compensating for a slightly lower contribution from startups and ramp-ups. Let's now review the main geographies.

Americas are at 5%. Demand in our industry is strong throughout the region, in oxygen in particular, while the OCI methanol plant is ramping up on the Gulf Coast.

In ndustrial Merchant, packaged gas end markets are very challenged in the U.S. and in Canada, and the pricing effect increasing along with inflation.

Healthcare growth is supported by medical gases in the U.S. and developments in Latin America.

On gases and equipment, sales are solid in electronics in the U.S. Europe is up 3%, anchored by the divestiture of a non-core subsidiary in electronics at the beginning of the year.

Large industries benefit from solid hydrogen demand in oil and gas is high in Europe, as well as from continuation activities. We also finalized the takeover of a first unit in Kazakhstan.

In Merchant, the pricing effect is ramping up, while growth for packaged gas remains lower than for bulk in Western Europe. Conversely, Eastern Europe is showing double digit growth only scheduled to very solid in particular in Germany and Northern Europe.

Asia is up 6% driven by solid Merchant on buoyant electronics, more than compensating for lower large industries due several customer turnarounds, notably in China. Merchant continues to be driven by strong volume and pricing in China and by the recovery in Australia.

Electronic sales are really strong for gases and even more for equipment and installation throughout the region and in particular in China, Korea and in Singapore. Middle East and Africa is supported by the Sasol ramp up in South Africa and by strong activity in Egypt, as well as by our Healthcare acquisition in Saudi.

Now, starting on Page 10, a quick wrap up by business line. In Merchants, we are aligned with Q2 trends with most of our end markets well oriented, in particular in North America and for developing economies, driven by strong China.

The pricing effect is at 2.9% for the Group to be compared with 1.9% in H1, and is now more in line with inflation. Large Industries are more contracted with the strong demand in Americas in a lesser extent in Europe, while Asia is impacted by turnaround.

Globally, oxygen volumes are up 8% and hydrogen volumes are up 5%. Healthcare is showing 6% growth, supported by Home Healthcare at plus 8% and solid Hygiene and Specialty Ingredients.

To finish with, the expenses up 9% for the quarter, carrier businesses are growing double digits in Asia, thanks to new contracts and 9% globally. Equipment and Installation sales remain very high and are 25% up through last year.

As mentioned, Engineering continues to recover and the level of order intake up 30% to last year will drive positive performance in 2019. So we noted the progression of the global market and technologies order intake is clearly supported by innovation and mainly driven by biogas projects on advanced technologies with the launch of a new generation of turbine.

In terms of performance, year-to-date we have been able to deliver €264 million or efficiency, which is an 11% increase to last year. The Group efficiency programs are progressively being deployed at Airgas, which contributes €22 million to this amount.

Industrial and logistics program represent 60% of the savings with an important part coming from merchant activities. We, therefore, confirm that we'll be again above this €300 million objective for the full year.

At Airgas, cumulative synergies resulting from the integration are now close to $275 million and we can confirm that the initial $300 million objective will be achieved early 2019, which is more than one year ahead of plan. Cost synergies are already above the pre-acquisition target and sales synergies continue to ramp up progressively.

The cash performance is also very solid. Year-to-date, we have delivering more than €3 billion of cash flow at 19.5% of sales, a 70 basis point improvement to last year.

Net CapEx at €1.7 billion are close to last year number with more industrial CapEx and slightly less acquisitions since the beginning of the year. Net debt continues to decrease following the May peak due to the dividend payment, and we are back on the 14 billion, while gearing remains under control and has lowered slightly at 78%.

So, to make it short, another very strong quarter for Air Liquide in all of our businesses. This is not us we said the beginning, the only good news as business development continues to accelerate.

And I will now hand over to Mike for a focus on investment to give you some more color on our signings and opportunities.

Thanks, Fabienne. With the continued success of our business development activities, we've seen a high level of new business signed in the first nine months of the year, totaling €1.9 billion at the end of September.

This is a level we've not seen since 2013. If we focus on the main project signed since January; 14 were above €20 million of CapEx, including three projects that are above €100 million; seven of these projects are in Asia, primarily in electronics; four in the Americas; and three are in Europe.

In total of these year-to-date signings represent a total capital investment above €750 million. In general, we've seen a very high success rate in our existing large industry basins, especially on the Gulf Coast of the U.S.

but also in Benelux and in Korea. And Electronics, all of the new business signed is aligned with key growth markets and supports our leading positions with Tier 1 customers.

In line with the acceleration of our business development activity, our project backlog which as a reminder is the aggregate total investment in projects above €10 million that are under construction but not yet started. That backlog is now up to €2.4 billion.

This underpins a future annual sales contribution of roughly €1 billion with new decisions clearly more than offsetting startups. There were limited major startups in the third quarter, three of them more modest sized, including the one takeover in Kazakhstan that Fabienne mentioned.

We project 10 new startups in the fourth quarter the major ones will be located in Asia. In regard to Fujian, the plant is running and we have obtained our two final permits for safety and environment, which is clearly good news.

However, the customer is still discussing the implementation of the signed contract and therefore we remain prudent on the commercial startup date. Year-to-date, the contribution of startups and ramp-ups to sales growth stands at €192 million and we expect to reach around €250 million in addition of sales for full-year 2018.

If we turn to bidding activity on Slide 20, it is very dynamic. We see a strong increase to business development opportunities that could be awarded in the next 12 months, reaching a level of €2.6 billion.

This is 20% higher than a year ago, returning to a level we haven't seen since second half of 2015. In terms of size, roughly half are less than €50 million with an average size of €20 million.

There are six opportunities in the €100 and €200 million investment range as well. The smaller overall size of the average project and the portfolio, along with the large number of projects, reduces project risk and will yield a smoother growth trajectory for the future.

As you can see in Slide 21, the portfolio is well aligned with the market trends we've discussed. A number of the business development opportunities are concentrated in the Americas with the share in Asia and the Middle East increasing as well, along with a slight decrease in Europe.

Focusing on the end markets, large industries represent more than 60% of the opportunities, driven primarily by the chemical and oil and gas sectors. Electronics opportunities comprise 15% of the portfolio.

So to conclude with continued strong growth and solid performance in the third quarter, we confirm our guidance for net profit growth for full year 2018. In addition, the business development opportunities are clearly increasing and will fuel future growth.

Thank you for your attention and we're now happy to answer your questions.

So, I've got two, the first is on industrial margin. So I know that you have very high pricing in industrial margin.

But when I look at the volumes by region, I see an improvement sequentially in Europe and APAC but quite a steep decline in the Americas. So, just wondering is this something structural and is it something that you can give color on?

And my second question is on Electronics, and I think we have seen quite weak commentary on Asia electronics by some of the industry participants there. So, just wondering do you think it's a fair question for the market on your electronic growth in the coming quarters, or is this something that we should not be worried about?

Thank you.

Maybe I will start to answer for IM and hand over to Mike for electronics. So, Industrial Merchants, I would say that the pricing is better.

I would not qualify it as a high pricing low. We have a slight volume decrease in Americas and you notice that in other zones, the global growth continues to improve.

This mainly due to two elements; first of all, we are developing portfolio management actions at Airgas, refocusing on the most active and profitable customers; and second, there was a slight slowdown due to the oil sourcing issues with the BLM. This is quite exceptional even that we have 35 -- apart from that the end markets continue to be very well oriented for our Industrial Merchant business in North America as they were in Q2, it's seasonally to be better in Canada, in particular in metal fabrication.

Worries about electronics, Mike?

What we’re seeing in electronics and you can see it in the numbers. We see actually continuing strength and continuing growth over the course of three quarters of the year.

Carrier gases are up 8.6% and that's really primarily driven by Asia, China, Japan and Taiwan, all saw significant increases in the quarter and we expect those to continue. The Advanced Materials business continues to grow we're in double digits for the quarter.

All geographies in Asia saw continuing ramp and the uptake of advanced materials. And we also saw the ramp of the enScribe molecules for later use in the electronics sector as well.

And the E&I continue to grow as well that was a very significantly in the quarter. It's been strong throughout the year and again, driven by Asia.

We continue to see new projects and new opportunities and growth, specifically in Asia around electronics and we would expect that to continue.

Firstly, with regards to -- obviously, there's the concerns of taking place specifically with China and the destocking that we’re seeing today. Is there any evidence that you’re seeing of softness in the fourth school with regards to where you might be exposed there either in cylinder or industrial merchant?

Any insights there would be much appreciated. And secondly, on the Equipment and Installations in Electronics, could you just help me understand where we are, obviously, 50% growth in quarter very, very strong.

But is that now back to the level that we were say exiting 2016 and we should now -- and what should be our expectations for the equipment and installations compartment into 2019? Thank you.

So, regarding China, our business in China remains very strong. It has been like that now for more than two years.

What we've seen this quarter is through down in large industries, this is directly due to a certain number of customer turnarounds, most of them were planned. So this is not a surprise.

Apart from that, merchant continues to be extremely strong in terms of volumes and in terms of pricing as well with double-digit growth. And electronics is also, as Mike mentioned, continuing to develop here again.

And we have a very strong double-digit growth. We don’t see any sign of slowdown in Q4.

Some of the customer outage will continue until the end of November but some will start and on the IM, on the Electronic side, everything continues to be well aligned. Your second question was about E&I, I think we’re at the level which is exceptionally high compared to our history at 17 million or so just for the quarter.

We have a book to bill ratio, which is at 1.4, which means that it will continue into Q4 and then we should see a slow down at the beginning of next year and probably at least mid-2019. But then we should have the continuous ramp up of the carrier gases.

Two questions from my side. Just coming back to the large industries in Asia and the turnarounds you mentioned in the less contribution ramp ups.

Can you just put a figure behind that? What was the impact from that?

Why overall comparable sales growth was minus 1.2% in Q3, so that we can get a better grip on what we have to expect in Q4 and then beyond? And secondly, on Electronics in Europe, I know that this is a rather small business for you.

But I remember that in Q2, you had suffered substantially. It was strong negative comparable sales growth, because you have done divestiture of a small electronic subsidiary.

Now, in Q3, I don’t see that anymore. It’s up quite nicely.

And I just want to -- how that comes that you have shown a strong rebound in comparable sales growth here in that area?

So on large industries in Asia, there are two components into play, the turnaround I mentioned and you remember also that we sold three units in the North of China at the end of last year. So, there is also small very little effect.

If we exclude that, the underlying growth of LI in Asia is 4%. So it remains solid.

Yes, we add the divestiture of non-core electronics subsidiary in Europe at the very beginning of the year. And that continues to impact, as I mentioned in my in my commentary.

It impacts the growth of Europe by approximately 0.5%, and that will start to soften in Q4. But it is there and electronics in Europe is still down in Q3 as it was in Q2.

First one was going back to U.S. and Canada.

I think you said when you bought Airgas that you felt the hard goods business was just lead indicator, I guess, particularly so now in the absence of the welding franchise. So just wondering if you could tell us how that business has performed through the quarter and then in the early part of October.

It sounds as like there’s no change but I just want to see the trajectory there if possible? Second question is on margin for the second half and also related to the ways for next year, the contribution from startups.

So the question on margin is, are you constantly with consensus for roughly plus 50 bps in the second half? And on the large industries question, I think you said when we met Fabienne in September that 250, which is obviously your guidance for this year, would be a broad number for next year with Fujian slipping into next year.

Does that mean 250 goes up?

So, let’s start by the first question about U.S. and Canada and in particular, hardgoods.

Mike, do you want to take that one.

Clearly, we’ve continued to see significant growth in all sectors, especially in North America. But the manufacturing and metal fabrication operations have been very strong throughout the year and they continue to be strong in the third quarter.

Order backlogs continue to remain very strong in that part of the business. And I think that we are going to continue to see the strength that we've seen throughout the year.

Also, in the construction market, in terms of general contractor, we've actually seen an uptick in the third quarter. I think on the year-over-year compared to earlier in the year, we were suffering a little bit from some of the big projects that had lapsed.

They had been completed, especially in the Gulf Coast and we're in startup. And now, we're starting to see new construction efforts and new growth in that regard as well.

And then finally even in the specialty construction markets, we're also seeing a lot of growth and that's more in the sectors that support maybe the oil and gas efforts and the upstream and the midstream, as well as a lot of infrastructure projects as well. So, we see a continued trajectory of growth in the metal fab market.

We see a continued trajectory of growth in the construction markets in general in North America, and that's continuing to be led by hardgoods growth. I think hardgoods growth was 9.3% in the quarter.

So, it’s been very strong.

Thank you, Mike. I will take the margin question, my favorite, as you know.

I'm not going to tell you the consensus is right, that would be quite unusual. As you know, margin is not our leading indicator.

However, we are committed to continue to see improve our margins nothing is going to deviate from that in H2. Concerning the start-up and ramp-up contribution for next year, when we discussed at that time, we already knew that the Fujian start-up was slipping a little bit by the end of 2018.

Now, it's more likely to be the beginning of 2019. But at this stage, it does not change our estimate.

Okay, so 250 million, Fabienne for 2019 as well is a broad guidance. Is that correct?

It is the best forecast we can give you.

Firstly, within the pricing dynamic in Industrial Merchants, could you give us an indication that within Americas how much of that really reflects -- and perhaps local currency weakening in some of the South American regions and offsetting the related inflation with that. And on balance, I suppose the follow-up to Andrew's question really.

When you look at the first half versus the second half and the current exit rate on pricing, how that compares to the rate of cost inflation? Is the broad message that I think I'm interpreting from your statement that the cost recovery is better in the second half than it was in the first but not yet fully recovering the rate of cost inflation if we exclude the savings for synergies?

That's the first question, very long one. And then the second one, your investment decisions.

Is the amount, the number the $380 million in aggregate that you say is within the existing hubs, and that's approximately 20% of the total year-to-date. And can you give us an indication of how the returns, you would expect returns on those projects to compare to your broader to longer term returns target, please?

So, on the merchant pricing within America, you saw that we have a pricing effect of 3.4%, North America lowering by 3%. So, yes, we have a component coming from the inflation in South America, and in particular in Argentina, but it's not the main part of it, obviously, at North America, although, it is at 3%.

We are better recovering our cost and our price effect is I think well in line with inflation in North America, still, a bit behind inflation in Europe. So, it's obvious that the particularly it's going to be better than what we add at the beginning of the year.

I think we are not still completely in line with inflation in particular in Europe. Investment decision, Mike?

Sure. I mean in terms of investment decisions.

As we talked about before with the long-term goal of double digit ROCE and a clear trajectory to get there, we continue to focus on the level of returns that will get us to a double digit ROCE in general for the group, which means whether it's a large industries investment, whether it's carrier gases and electronic. We've got to have those double digit returns, if we're going to go ahead and succeed.

So that's clearly where we're at. We continue with that going forward.

Yes, I mean, just a follow-up. I fully understand the long-term goal, but within that and component of the investment decisions.

Is it safe to say or safe to assume that the returns on those hub investments will be substantially above your long-term return?

Well, I think, you know that when we invest in the business where we have a strong position after full ramp up and the transition of the source through the pipeline. And yes, that's where we have the best return obviously.

Good morning, Fabienne, good morning Mike, just a couple of questions for me. When I think about the backlog that you have increased to €2.4 billion and the €1 billion of sales in the pipeline, you're going to stir for 250 next year which is your best guess.

But I guess few questions on the backlog. Given the number of pipeline opportunities, how big can that backlog get?

And over what period would you anticipate delivering that €1 billion sales? So two separate questions, the 2.4 could that breach 3 for example in the coming quarters given what you can see right now?

And in terms of the €1 billion you've talked about, how quickly do we see those sales coming through i.e. should it be more or less 250 a year for the next 4 years?

And then my second question is on GM&T where we've seen almost the doubling in order intake in that business. Can you talk about what that does for the growth dynamics in GM&T where that's coming from?

Is it the bio-methane business and the kind of margins that that business or that new intake is generating? Because it's traditionally relatively low margin business, but are we to believe that the increased activity is at those lower margins?

Or do we see it's got a mix in that intake as well?

So maybe in terms of the backlog and moving where we see that growing too. Clearly, there is a lot of strength right now in business development activities.

And we see very solid growth whether that's in the Americas, whether that's in Asia, whether that's in the Middle East. And even though, Europe was a little bit lower recognized that it's really driven primarily by the fact that the entire portfolio has grown, so it's a percentage it's a bit off.

But in general, we see continued growth. I wouldn't forecast it will be a three by the end of the year.

I think the point is we continue to see significant business development opportunities. We continue to see all the dynamics of growth and we don't see that slowing down.

So whether that is a €2.6 billion or €2.8 billion or whatever it is, the point is that it's very, very strong. In terms of realizing those revenues, typically for large industries project, you're looking at a course of a 3-year horizon for some of the electronics investments maybe a 2 year horizon.

So somewhere in the 2 to 3 year range, it's probably where we should be thinking.

Understood. And just one that, Mike, because we see some of the, your competitors signing some very, very large contracts and it's just interesting to me that you've focused on some of the smaller opportunities and the hub opportunities as you've just talked about.

Is there anything that's making you shy away from some of those really, really big potential contracts out there? Or is it, it's on the radar but just you haven't found the right ones yet?

Like I said in the commentary, we clearly are focused on the opportunities as they present themselves. We aren't just focused on a particular size project.

It works out especially with where we are in the pipeline systems and in a variety of other geographies. That some of the smaller to midsized projects are clearly accretive in nature and a real opportunity especially where they align with our major customers and the Tier 1 players and electronics.

But again, there's a half a dozen major projects in the €100 million to €200 million range. So, I think we are still very focused on the large projects as well.

Okay. And GM&T?

Regarding GM&T, what you need to understand is that in GM&T you have a variety of different type of businesses. A bit less than 50% of the GM&T business relies on order intake.

So, it's not all of the business. Now in this 50% of the business we now order intake, you can find order intake for the space industry for example where you can have the 3 to 4 years delivery.

That's very long contract on project that are spread over time or you can have order intake regarding by you guys you need and that could be deliver in one year. So, it's difficult out of the order intake to draw a future growth.

However, you've seen that since its creation GM&T add growth between 10% and 13%, I can confirm that we still expect an average growth around 20% for the months to come and the business remained very dynamic. In terms of profitability for GM&T, here again, there are very different businesses.

Our advanced technology contracts have a margin which is more or less in line with the good average when the most innovative investment like in hydrogen energy, for example, our variable margin is not, no margin at all. So, yes, again it is a mix.

Okay, but generally speaking, is this -- should we assume a stable margin, Fabienne? Or does the increase business activity mean that you get some operational gearing or leverage or better mix that drags it up?

Or is it just safer to keep it relatively stable?

I think in GM&T, we are happy with a margin around 10%. And the objective is really to use most of the profitable business to finance more innovation and more active development in the business of tomorrow or 10 years from now.

So, the objective in GM&T is not to boost the margin of the group, obviously not. It's just to compare our future.

Two quick questions. First, could you speak a little bit about the difference you are seeing in industrial merchant between a non-residential construction and industrial market in China and in North America?

And can you give a characterization how you are thinking about the backlog of acquisition target for the packaged gas business in the U.S.?

So in IM, the very detailed analysis that Mike shared with you for Americas, but end market we obviously don't have the same level of detail in China where we move through our business by region but what is driving IM performance in China as these the beginning of the businesses in industrial market. Mike, if you want to add something in Americas?

Yes, I guess the only thing I would add is that I spoke to the construction activity that's underway. And from the industrial side, however, we see a lot of industrial growth in construction both in terms of the higher oil prices, and we saw that really ramp back up whenever oil prices increased.

So in the upstream part of the business in terms of not just the facilities but the pipeline systems and also in the midstream, we continue to see a lot of strength there. With the next wave of chemical plans that are being built, we can see -- continue to see growth there, and we will see that in the coming years as well as that evolve.

There is a lot of infrastructure spend into more specialized areas and if that's more spread throughout North America specially you are throughout the U.S. so whether that's on the gulf coast whether that's on the west coast whether that's on the northeast there are different programs and different projects where we see infrastructure projects and actually some of the technological applications that we have with an area of the key that we can now leverage in the air gas or helping us to go ahead and deliver even better in those areas.

So I think we see that growth I wouldn’t differentiate that we look at the non-residential growth and we look at the industrial growth and were comparing the two rather I would say we see a good trajectory for both at the moment.

In terms of acquisition you know that bolt-on acquisition to extend our local presence remained a component of your growth strategy. So, this is true for our gas, and our gas continues to welcome some more acquisition and to entertain the portfolio of independent payers that could join the group one day or another.

This is not the only place we have programs in China, we have programs in Latin America. So, you see a bolt-on acquisition programs continue to be a component of the merchant development strategy.

Three remaining questions. First one is on the start-ups and here you extend that you have quite, in particular in China, you had saw the effect of the start-ups have been delayed quite heavily.

Do you see this risk as well as for this year? That's my first question.

And second question is on electronic gases, maybe you can shift some light, what has structure changed over the last years in the past that electronic gases was highly as typical and now it looks like that part of the business more large industry charter like business take and pay contract, maybe you can tell us what -- how many of this contract such as take-or-pay structure? And then the last one is on the shortage or tightness of truck driver.

Do you see higher personal cost there? And how's the ability to pass on this higher cost to your customers?

So on the start-up and ramp-up delay, the only delay or uncertainty is related to Fujian. For the rest, we don’t have any specific issues.

Our electronic business as it was a lot for the last 10 to 5 years achieved, you know that we have strongly reinforced our Advanced Materials activities and we have taken disputed and reposition in China with stronger market share with the Tier 1 player. So today if you look the reference business, 40% is carrier gas.

So for carrier gas, we have medium term contract, not as strong for our industry, but from 8 to 10 years. On further contract, most of the time we got take-or-pay, the rest of the business 20% specialty gases, 20% Advanced Materials and then E&I is not governed by long-term contract or take-or-pay, so it’s a different world.

And Shortage of drivers, maybe Mike this one is for you.

So, there is no doubt, there has been lot of discussion about a shortage of drivers, especially in the U.S. today, but we have not had any problems in terms of ourselves of finding drivers.

We've seen as a value employer. We work hard to go ahead and develop the long-term benefits for drivers.

We continue to go ahead and work that and make sure we manage that in a right way. In terms of the pass-through of incremental cost, we clearly are driven pricing and whether that's the various aspects of the cost drivers and including, if it's increased in transportation costs, we do pass that through.

So, I think all that's in a good place.

I just had a question around the visibility that you guys have in general in your business as I think large industrial one can agree that there is a longer visibility, but in terms of your industrial merchant business. Can you just give us some sense of how long visibility you guys normally have in this business?

And the crux of the question is, we’ve seen all of these data points coming out of China except just suggesting a slowdown where you guys are still talking very bullishly on China demand. So just wanted to understand, how you guys take into account what happening on the ground and how that translates into the visibility in the business?

You know that industrial merchant is correlated to the industrial prediction in the various countries where we have business. For example when we prepay our focus or target, the first thing we look at is the initial position forecast and then we adapt our objectives or we amend our objectives based on the evolution of the industrial production.

So that’s how we work it out. Maybe Guy, you want to add something with the example of Europe may be?

Yes, maybe just to illustrate a little bit how the emerging market sort of develops. Emerging market is a fundamentally very diversified market, okay, geographically of course, but also from a business point of view, different products, but also addressing variety and both variety of markets.

Typically in Europe today, we see a certain number of strong drivers that continuing the construction, okay. As, in a similar way to what Mike will be also mentioning for Americas.

We see also some activities, say, being substituting by others. We hear a lot about the automotive industry that may be is less dynamic, that has perspective issues in mid-term transforming itself.

But at the same time, we see ourselves for that market also strongly growing in other parts of it, typically, on the emission controls aspects of things. That is a very high and sensitive topic today.

And therefore, for which we can bring specific offers and products in those markets. So fundamentally, the merchant market is a robust resilient activity that has also a lot of capacity to introduce some innovations on which we continuously work.

And it is offering some compensation between the different sub-segments. When we look at all our segments today, worldwide, they’re all more or less greener, looking forward.

So I think we have in front of us something that should continue to show strong robustness.

And maybe if I can follow up in terms of linearity of the growth through the Q3, I mean, have you seen any change in terms of maybe beginning of the quarter to end of the quarter or entering the Q4? Has there been no material change in terms of linearity of growth, especially in some of these emerging markets, and you mentioned the Chinese pricing being strong as well.

So any sort of change that in linearity or do you think it was fairly stable through the quarter?

No, no. We saw an underlying business in most of our countries, not all of our countries, which is really consistent with the Q2 trends.

It continues to be very solid. We supplement, of course, those market trends by strategic actions.

Guy mentioned innovation. It can be also bolt-on acquisition.

It can be customer centric initiative to grow more direct to the final customer. So we can also influence growth by our own action, but we’ve not seen any signs of slowdown even at the end of the quarter.

Two questions. The first one and I’ve heard everything you’re saying to Andrew and Neil, and I recognize it’s not a margin call.

But just in terms of the mix effects that you’re seeing in the first half and you've highlighted dragging on that margin increased restoring we saw in the first half. So, the equipment fails in electronics outages and I guess when I look at Q3, I’m looking at the Airgas on site in Europe a bit softer.

Just on mix, has there been a material change as we're going through the third quarter against what you’re seeing in the first half, particularly bear in mind you say the equipment is going to be strong in the fourth quarter as well? And then the second question is around you shared a number on the Gulf Coast investments with some of the smaller investments and I guess customers you don’t want to be disclosed.

Have you got a number you can share for the last few years like from 2015? What you won on the Gulf Coast in terms of investments and signed projects.

Thank you.

So regarding the margin and on the mix, it's true that part of what we had identified in H1, it is there and in particular the high level of the equipment penetration, and in fact that in Europe, we still have the stronger bulk activities and packaged gas activities. Regarding the turnaround, barring any specific incident and forecasted incident we shouldn’t have more turn around in Q4 this year than what we had last year, at the group level.

Then it depends from one region to another, but globally it should be more or less at the same level.

Okay.

To elaborate on our presence in the Gulf Coast.

As I mentioned before we continue to see very strong business development activity in the Americas and basically that's driven in the Gulf Coast. And I think over the course of the last year we've continue to sign a number of projects especially in the Airgas space as well as in hydrogen off-take, and that continues to grow favorably for us.

So, we've seen both investments and opportunities in terms of the Airgas space across both pipeline systems. We've continue to see some level of hydrogen opportunity as well and also investment in terms of the infrastructure on the utility systems and a variety of things like that.

So I think in general in all aspects we've seen continued growth, and we continue to see that of all the size of the projects evolves from one point to another. But I think as we look forward and as I said before over 40% of the new opportunities we see are in the U.S.

and primarily those around the Gulf Coast.

Thanks Mike. I was actually looking back.

I was trying to get a feel for what you signed from 2015 on the Gulf Coast because I realized some customers don't want to disclose, and obviously you've been signing quite a few of these smaller incremental projects. So, you have given this 200 million in 2018.

Just wondering over last few years, what sort of level of signature there's been?

If you want numbers, we will give you numbers. If you look at the 5 years period, 2014 year-to-date 2018, we have signed around €900 million of investment in the U.S.

and this spread between 14 projects. Does that answer to your question?

I think so. I think so.

I can always come back. Don’t worry.

Thank you.

I have two questions actually. The first one would be just to confirm if I am not wrong, that your best guess for 2019 for start-up and ramp-up contribution would be to €150 million?

That would be my first let’s say clarification. The second one is regarding margins in your engineering business which at some points last year, while the beginning of this year, we spoke about probably having margins of single digit margins for 2019.

I'm not sure if that's still the case. And the last question as regarding and will the margin expected for next year in the sense that we've added quite impressive consensus figures assumed around the 100 basis points, 90 to 100 basis points of increase in margins for next year.

And I don't know if you have any comments to make on that would be quite happy to hear from you?

So coming back to start up and ramp up, €250 million is our best estimate at the moment, and we discussed that in February when we published our full year. Regarding E&C, you know that the E&C business has been difficult.

We've been losing money in H1. The objective is to be a little bit better than breakeven for H2, but we are still being negative for the full year.

And we said, we would come back positive in 2019. Our goal is certainly not going to be double digit a mid-single digit would already be a good performance compared to what we had for the last 2 years.

Then margin in 2019. That we talk more extensively about the year to come when we publish in February.

So I don't have comments at this stage. Thank you.

So, maybe one last question?

Yes, good morning all and I promise it will be a quick one. On the PEMEX, DCAP, it looks like there is a bit of slippage in also about 3 months.

I was just wondering what driving that? And maybe more generally Fabienne, you can talk about the DCAP environment?

I think back when you announced the first PEMEX deal, there was some expectation that the DCAP opportunity was actually materializing a bit fast and quicker than we assumed. We haven't seen a lot this year.

So, I'm just wondering, has there been any change in appetite for buyers or indeed sellers around that opportunity?

In terms of PEMEX, it's just be pushed out by 3 months. The customer is not ready yet.

PEMEX is not ready yet for the additional hydrogen. We've already taken over the facility.

It's ours. It's fully protected by the typical Large Industries contracts.

We're just waiting for them to have the need for the hydrogen to start up the facility.

Okay.

Maybe, Guy, regarding another takeover which has happened over the period?

So in terms of the examples of DCAP, now the one that is taking place there just started in September is a one in Kazakhstan in the national oil company called KMG, which is the core company over there to doing the refining. So, we have one project that is started up in Pavlodar refinery.

And we expect maybe possible others to come. So, the trend is continuing.

It sometimes takes a little longer than what we could expect. But fundamentally I think this is a long term trend that is pursuing.

Regarding DCAP.

Right, we have discipline on the particular projects we are working on. It could take some time to materialize.

I guess the discussion with the customer maybe quite thorough before they make the decision, but we have a bunch of them in particular in China.

So, if there are no further questions, I think we'll now stop there. Thank you very much for your attention.

Just as a quick conclusion, I think it's an excellent quarter for Air Liquide. We have a lot of good news.

We have a strong activity, so good news for the short term in terms of performance. We are aligned on a very promising development activity, so good news for the medium and long-term as well.

Thank you very much. Have an excellent day and we'll talk to you at the end of November on a very different subject with climate objective.

Goodbye.